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Auditing Acct 3001
One of his first tasks is to review the firm’s audit clients (all public interest entities) to ensure that independence requirements of APES 110 (Code of Ethics for Professional Accountants) are being met. His review has revealed the following:
(c) Johnny, FCPA, is the engagement partner on the audit of Yummy Food Services Limited (YFSL). Johnny’s sister Rebecca owns a large number of shares in a mutual fund investment company, XYZ, which in turn owns shares in YFSL. Rebecca’s investment in XYZ is material to both her and her partner Jack. Reading the investment company’s most recent financial report, Johnny is surprised to learn that the XYZ’s ownership in YFSL has increased dramatically.
(d) ACA has recently been appointed the auditor of Delicious Foods Limited (DFL).The senior-in-charge, Andrew Reynolds, and an assistant observed the inventory stocktake. On completion of the inventory observation, Karla White, Delicious Foods’ accountant, informed Andrew that the shipping supervisor had a small gift for him and the assistant. Andrew asked Karla what the gift was for, and Karla responded that they had always given small gifts of food items to their previous auditors on completion of the inventory observation. Andrew estimates that the value of the food is less than $100.
1. Identify potential threat(s) to independence & recommend safeguards (if any) to reduce the independence threat(s) identified.
2. Provide an objective assessment of whether audit independence can be achieved
(c) Johnny, FCPA, is the engagement partner on the audit of Yummy Food Services Limited (YFSL). Johnny’s sister Rebecca owns a large number of shares in a mutual fund investment company, XYZ, which in turn owns shares in YFSL. Rebecca’s investment in XYZ is material to both her and her partner Jack. Reading the investment company’s most recent financial report, Johnny is surprised to learn that the XYZ’s ownership in YFSL has increased dramatically.
(d) ACA has recently been appointed the auditor of Delicious Foods Limited (DFL).The senior-in-charge, Andrew Reynolds, and an assistant observed the inventory stocktake. On completion of the inventory observation, Karla White, Delicious Foods’ accountant, informed Andrew that the shipping supervisor had a small gift for him and the assistant. Andrew asked Karla what the gift was for, and Karla responded that they had always given small gifts of food items to their previous auditors on completion of the inventory observation. Andrew estimates that the value of the food is less than $100.
1. Identify potential threat(s) to independence & recommend safeguards (if any) to reduce the independence threat(s) identified.
2. Provide an objective assessment of whether audit independence can be achieved
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